Wealth Effects of Rare Earth Prices and China’s
Rare Earth Elements Policy
Online Appendix
Figure OA1. Overview of WTO Dispute Resolution Case. This figure shows an overview of the main events of the dispute resolution case launched by the U.S., the EU, and Japan against China concerning China’s export policies with regard to REEs. The figure is based on TMR (2014) and WTO (2014a, b, c, d, e, f).
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TABLE OA-I
Applications of Rare Earth Elements
Element / Symbol / Field of ApplicationCerium / Ce / -Environmental protection and pollutioncontrol
-Automobile catalytic converters
-Jet engines
-Petroleum refining catalyst
-Diesel fuel additive
-Metallurgy
-Glass polishing
-Carbon-arc lighting
-Lighter flints
Dysprosium / Dy / -High performance motors in next-generation vehicles
-Wind power generation
-Energy-saving consumer electronics
Erbium / Er / -Amplifier in long-range fiber optic data transmission
-Lasers for medical and dental use
-Coloring glass (e.g., sunglasses and decorative crystal glasses)
-Metallurgy
Europium / Eu / -Red phosphors used in TVs and computer screens
-Fluorescent lighting
-Biochemical agents for tissue research
-Control rods in nuclear reactors
Gadolinium / Gd / -Magneto-optic recording technology
-Magnetic resonance imaging (MRI)
-Garnets for microwave applications
-Phosphors for TVs
-Metallurgy
Holmium / Ho / -No commercial usage
Lanthanum / La / -Petroleum refining catalysts
-Fuel cells and batteries
-Optical lenses (camera lenses)
-Night vision instruments
-TVs
-Lighter flints
-Ceramic glazes
-Optical fibers
-X-ray films
-Lasers
-Hydrogen sponge alloys
Lutetium / Lu / -Catalysts in cracking, alkylation, hydrogenation, and polymerization
-Positron emission tomography (PET)Radar systems
-Neutron absorber in nuclear reactors
-Filtering glasses
-Carbon-arc lighting
(continued)
Neodymium / Nd / -Permanent magnets for-Consumer electronics (cell phones, CD players, computers, sound systems)
-Motors (wind energy turbines, electric and hybrid cars)
-Lasers
-Ceramic capacitors
-Coloring pigment (ceramic tiles, glass)
-Lighter flints
Praseodymium / Pr / -Aircraft engines
-Coloring pigment (ceramic tiles, glass, enamel)
-Permanent magnets
-Capacitors
-Fiber optics
-Photographic filters
-Airport signal lenses
-Welders glasses
-Lighter flints
Promethium / Pm / -Thickness gages
Samarium / Sm / -Permanent magnets (especially for aerospace and defense applications)
-Radar systems
-Neutron absorber in nuclear reactors
-Filtering glasses
-Carbon-arc lighting
Scandium / Sc / -High performance materials for aerospace
-Lasers
-Lighting
-Consumer electronics
Terbium / Tb / -Energy efficient lighting
-Magneto-optic data recording
-Crystal stabilizer in fuel cells
Thulium / Tm / -X-rays
Ytterbium / Yb / -Stress gauges to monitor ground deformations (e.g. caused by earthquakes or explosions)
-Metallurgy
Yttrium / Y / -Improved fuel efficiency and reduced pollution of car engines
-Microwave communication devices
-Frequency meters, magnetic field measurement, tunable transistors, Gunn oscillators
-Stabilizer (jet engines, rocket nose cones)
-Laser crystals (military communication)
-TVs
This table gives an overview ofthe fields of application foreach REE. Classification is analogous to Jackson et al., 1993, and Hurst, 2010a, 2010b.
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TABLE OA-II
Usage of Rare Earth Elements by Industry
Rare Earth OxideEnd Use / Ce / La / Nd / Y / Pr / Dy / Gd / Sm / Tb / Eu / Other
Panel A: Metric Tons (t) of Rare Earth Oxides
Automobile catalytic converters / 6,840 / 380 / 228 / - / 152 / - / - / - / - / - / -
Ceramics / 840 / 1,190 / 840 / 3,710 / 420 / - / - / - / - / - / -
Fluid catalytic cracking / 1,980 / 17,800 / - / - / - / - / - / - / - / - / -
Glass additives / 7,920 / 2,880 / 360 / 240 / 120 / - / - / - / - / - / 480
Metallurgy, except batteries / 5,980 / 2,990 / 1,900 / - / 633 / - / - / - / - / - / -
Neodymium magnets / - / - / 18,200 / - / 6,140 / 1,310 / 525 / - / 53 / - / -
Battery alloys / 4,040 / 6,050 / 1,210 / - / 399 / - / - / 399 / - / - / -
Phosphors / 990 / 765 / - / 6,230 / - / - / 132 / - / 414 / 441 / -
Glass polishing / 10,700 / 5,170 / - / - / 574 / - / - / - / - / - / -
Other / 2,930 / 1,430 / 130 / 1,430 / 300 / - / 75 / 150 / - / - / 75
Total / 42,220 / 38,655 / 22,868 / 11,610 / 8,738 / 1,310 / 762 / 549 / 467 / 441 / 555
Panel B: Percentage (%) of Rare Earth Oxides as to End Use
Automobile catalytic converters / 16.20 / 0.98 / 1.00 / - / 1.74 / - / - / - / - / - / -
Ceramics / 1.99 / 3.08 / 3.67 / 31.96 / 4.81 / - / - / - / - / - / -
Fluid catalytic cracking / 4.69 / 46.05 / - / - / - / - / - / - / - / - / -
Glass additives / 18.76 / 7.45 / 1.57 / 2.07 / 1.37 / - / - / - / - / - / 86.49
Metallurgy, except batteries / 14.16 / 7.74 / 8.31 / - / 7.24 / - / - / - / - / - / -
Neodymium magnets / - / - / 79.59 / - / 70.27 / 100.00 / 68.90 / - / 11.35 / - / -
Battery alloys / 9.57 / 15.65 / 5.29 / - / 4.57 / - / - / 72.68 / - / - / -
Phosphors / 2.34 / 1.98 / - / 53.66 / - / - / 21.26 / - / 88.65 / 100.00 / -
Glass polishing / 25.34 / 13.37 / - / - / 6.57 / - / - / - / - / - / -
Other / 6.94 / 3.70 / 0.57 / 12.32 / 3.43 / - / 9.84 / 27.32 / - / - / 13.51
Total / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00 / 100.00
This table shows the various end usage of rare earth oxides in 2008. Panel A shows metric tons (t) of rare earth oxides and panel B the percentage of rare earth oxides as to end use. Table is based on Goonan (2011). Ce: cerium; La: lanthanum; Nd: neodymium; Y: yttrium; Pr: praseodymium; Dy: dysprosium; Gd: gadolinium; Sm: samarium; Tb: Terbium; Eu: Europium. Light rare earths: Ce, La, Nd, Pr, Sm; heavy rare earths: Y, Dy, Gd, Tb, Eu.
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TABLE OA-3
Correlation Between FOB and China Returns and Oxide and Metal Returns
Panel A / Panel BElement / Oxides / Metals / FOB / China
Ce / 0.2816 / 0.2585 / 0.7133 / 0.4428
Dy / 0.5091 / 0.5618 / 0.8580 / 0.8766
Er / 0.4307 / na / na / na
Eu / 0.6431 / na / 0.8108 / na
Gd / na / na / na / na
Ho / na / na / na / na
La / 0.2974 / 0.2825 / 0.7710 / 0.7104
Lu / na / na / na / na
Nd / 0.6525 / 0.5777 / 0.7205 / 0.8414
Pr / 0.6570 / na / 0.6641 / na
Sc / na / na / na / na
Sm / na / 0.2763 / 0.5837 / na
Tb / 0.6259 / 0.5868 / 0.7514 / 0.7931
Y / 0.2911 / na / na / na
Yb / na / na / na / na
EWI / 0.5092 / na / na / na
UWI / 0.4743 / na / na / na
This table shows in panel A the correlations of FOB and China returns for rare earth oxides and metals and in panel B the correlations of oxide and metal returns for FOB and China prices. All calculations are based on the period January 1, 2004-November 8, 2013. Depending on data availability, the period might differ for single elements:For FOB prices of lanthanum, cerium, praseodymium, neodymium, samarium, europium, terbium, and dysprosium oxide, the time series begins in January 2004. For FOB prices of yttrium and erbium oxide, the time series begins in August 2010. For China prices of yttrium, lanthanum, cerium, praseodymium, neodymium, europium, terbium, and dysprosium oxide, the time series begins in January 2005. For China prices of erbium oxide, the time series begins in January 2009. For China prices of gadolinium oxide, the time series begins in July 2010. For China prices of scandium, holmium, and ytterbium oxide, the time series begins in November 2010. For metals, the time series for FOB prices begins in January 2004; the time series for China prices begins in January 2005.Calculations are based on prices from the Asian Metals database; all calculations based on USD/kg. Ce: cerium; Dy: dysprosium; Er: erbium; Eu: europium; Gd: gadolinium; Ho: holmium; La: lanthanum; Lu: lutetium; Nd: neodymium; Pr: praseodymium; Sc: scandium; Sm: samarium; Tb: terbium; Y: yttrium: Yb: ytterbium; EWI: equally weighted REEs index; UWI: usage weighted REEs index; na: not available.
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TABLE OA-IV
Descriptive Statistics of Rare Earth Element Returns
Element / Mean(%) / Std. Dev.
(%) / Skewness / Kurtosis / Min
(%) / Max
(%)
Panel A: Light Rare Earth Elements - Oxides
Lanthanum / FOB / 0.2515 / 5.7444 / 5.9102 / 77.8952 / -19.7064 / 79.5464
China / 0.2137 / 3.9662 / 4.1957 / 28.5485 / -12.2383 / 32.7266
Cerium / FOB / 0.3115 / 6.3973 / 6.6527 / 88.0544 / -23.5120 / 91.2557
China / 0.2616 / 3.8067 / 1.5935 / 15.6668 / -25.6443 / 26.0562
Praseodymium / FOB / 0.6548 / 3.7769 / 2.1700 / 13.0546 / -13.6305 / 29.5065
China / 0.5617 / 3.7596 / 1.7323 / 13.5250 / -14.1468 / 27.2856
Neodymium / FOB / 0.5540 / 4.1687 / 1.9726 / 10.1446 / -15.1231 / 23.8615
China / 0.4565 / 3.7635 / 0.8356 / 5.3077 / -14.1468 / 18.4028
Samarium / FOB / 0.2985 / 10.9429 / 17.1269 / 342.3149 / -31.8454 / 220.3836
China / na / na / na / na / na / na
Europium / FOB / 0.3039 / 4.3391 / 7.2963 / 99.7978 / -18.1346 / 63.8614
China / 0.2520 / 4.1121 / 3.8387 / 35.0352 / -17.5421 / 43.1380
Gadolinium / FOB / na / na / na / na / na / na
China / 0.7449 / 9.4572 / 3.0601 / 22.1692 / -36.7055 / 67.0247
Panel B: Heavy Rare Earth Elements - Oxides
Scandium / FOB / na / na / na / na / na / na
China / 0.4353 / 2.9112 / 3.4175 / 18.1762 / -8.0209 / 18.3524
Yttrium / FOB / -0.3051 / 5.7630 / -0.0807 / 4.1003 / -25.1314 / 22.2062
China / 0.1396 / 4.3882 / 4.6492 / 45.7122 / -11.7720 / 50.5095
Terbium / FOB / 0.3317. / 4.4361 / 3.7653 / 33.6598 / -21.5111 / 46.3715
China / 0.2147 / 4.0460 / 1.6315 / 20.8621 / -25.5210 / 36.0936
Dysprosium / FOB / 0.6766 / 4.0428 / 3.9260 / 30.7422 / -12.3444 / 41.6073
China / 0.5156 / 4.4012 / 1.7856 / 10.2268 / -16.1076 / 27.5130
Holmium / FOB / na / na / na / na / na / na
China / 0.5147 / 7.8257 / 2.7620 / 13.1872 / -18.3639 / 48.7420
Erbium / FOB / 0.0215 / 4.5290 / 1.5670 / 12.7182 / -17.9971 / 27.7802
China / 0.6344 / 3.9500 / 0.5309 / 7.0057 / -19.6629 / 19.2885
Ytterbium / FOB / na / na / na / na / na / na
China / 0.5310 / 6.5384 / 2.3007 / 29.2788 / -34.0509 / 43.3336
Lutetium / FOB / na / na / na / na / na / na
China / 1.0730 / 5.6295 / 3.0347 / 17.5483 / -20.9647 / 34.1780
(continued)
Panel C: Rare Earth Elements Indices - OxidesEqually Weighted REE-Index / FOB / 0.4698 / 4.0860 / 3.7192 / 34.0738 / -11.8418 / 45.1356
China / 0.3396 / 3.1530 / 1.8625 / 10.1350 / -9.7304 / 23.1428
Usage
Weighted REE-Index / FOB / 0.4685 / 4.4003 / 4.8573 / 50.1515 / -12.7768 / 53.9809
China / 0.3519 / 3.0723 / 1.7515 / 9.1939 / -9.4590 / 20.2184
Panel D: Light Rare Earth Elements - Metals
Lanthanum / FOB / 0.2545 / 4.9352 / 5.0627 / 53.7797 / -17.0626 / 59.4987
China / 0.1957 / 3.2912 / 4.9622 / 42.5513 / -10.5732 / 34.9696
Cerium / FOB / 0.2717 / 5.3298 / 5.0870 / 44.7662 / -14.5712 / 59.6816
China / 0.2376 / 4.0283 / 2.4723 / 29.7189 / -24.8137 / 34.9660
Praseodymium / FOB / 0.6386 / 3.7138 / 1.6029 / 7.9390 / -17.8248 / 19.7266
China / na / na / na / na / na / na
Neodymium / FOB / 0.5670 / 3.9561 / 1.6826 / 9.5014 / -15.8433 / 29.2089
China / 0.4658 / 3.5356 / 0.7323 / 5.3405 / -14.2398 / 18.6302
Samarium / FOB / 0.3020 / 4.3914 / 5.5455 / 50.8280 / -16.0343 / 44.8123
China / 0.1338 / 4.2496 / 8.2243 / 120.5947 / -17.0150 / 63.5943
Europium / FOB / 0.1779 / 3.9870 / 7.6402 / 106.2760 / -24.0676 / 58.0763
China / na / na / na / na / na / na
Panel E: Heavy Rare Earth Elements - Metals
Terbium / FOB / 0.2781 / 4.3486 / 2.9726 / 25.4015 / -24.5122 / 38.2674
China / 0.1470 / 4.1067 / 3.4687 / 26.3914 / -12.7818 / 35.3877
Dysprosium / FOB / 0.6283 / 3.7562 / 2.8723 / 22.3853 / -17.6931 / 33.8195
China / 0.5167 / 4.2594 / 1.9191 / 14.9918 / -15.8877 / 31.2081
Panel F: Rare Earth Elements Index - Metals
Equally Weighted REE-Index / FOB / 0.3683 / 3.6419 / 2.7682 / 19.4627 / -15.6328 / 31.7379
China / 0.2426 / 3.9054 / 2.5029 / 17.8574 / -17.3531 / 31.9673
This table givesthe mean, standard deviation, skewness, kurtosis, minimum, and maximum for theweeklylog-return distributions of REE pricesfor the January 1, 2004-November 8, 2013 period. Depending on data availability, the period might differ for single elements: For FOB prices of lanthanum, cerium, praseodymium, neodymium, samarium, europium, terbium, and dysprosium oxide, the time series begins in January 2004. For FOB prices of yttrium and erbium oxide, the time series begins in August 2010. For China prices of yttrium, lanthanum, cerium, praseodymium, neodymium, europium, terbium, and dysprosium oxide, the time series begins in January 2005. For China prices of erbium oxide, the time series begins in January 2009. For China prices of gadolinium oxide, the time series begins in July 2010. For China prices of scandium, holmium, and ytterbium oxide, the time series begins in November 2010. For metals, the time series for FOB prices begins in January 2004; the time series for China prices begins in January 2005. Returns are based on end-of-week price and the prior week’s end-of-week price. Price data comes from the Asian Metals database; all calculations based on USD/kg. Panels A through C are based on oxide prices:Panel A shows results for light REEs, panel B for heavy REEs, and panel C for REE indices. We calculate two indices: The equally weighted REE-Indexis calculated as the equally weighted average return for all REEs for which both, FOB and China prices are available. The usage weighted REE-Indexis calculated as the end usage weighted (weights are calculated as in Table OA2) average return for the four most important REEs as to end use (cerium, lanthanum, neodymium, yttrium). These four elements account for about 90% of all rare earth usage. Panels D through F are based on metal prices: Panel D shows results for light REEs, panel E shows results for heavy REEs, and panel F shows results for the REE-Index. As metal prices for yttrium are not available, only the statistics for the equally weighted index are displayed. Na: not available.
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TABLE OA-V
Correlation Matrix of Rare Earth Elements Returns – Oxides
Ce / Dy / Er / Eu / Gd / Ho / La / Lu / Nd / Pr / Sc / Sm / Tb / Y / Yb / EWI / UWICe / 0.1784 / 0.4522 / 0.1802 / na / na / 0.8631 / na / 0.4659 / 0.4636 / na / 0.3239 / 0.2447 / 0.5167 / na / 0.7763 / 0.8507
Dy / 0.2363 / 0.5632 / 0.6530 / na / na / 0.2166 / na / 0.5438 / 0.4226 / na / 0.0923 / 0.7177 / 0.3115 / na / 0.4057 / 0.3564
Er / 0.4434 / 0.604 / 0.4249 / na / na / 0.4551 / na / 0.6348 / 0.6248 / na / 0.5041 / 0.4823 / 0.3783 / na / 0.6209 / 0.6117
Eu / 0.3172 / 0.6839 / 0.4834 / na / na / 0.1778 / na / 0.4407 / 0.3262 / na / 0.1225 / 0.7032 / 0.3199 / na / 0.3471 / 0.3086
Gd / 0.4488 / 0.4962 / 0.4028 / 0.4962 / na / na / na / na / na / na / na / na / na / na / na / na
Ho / 0.4079 / 0.6826 / 0.5388 / 0.7973 / 0.4968 / na / na / na / na / na / na / na / na / na / na / na
La / 0.6215 / 0.2204 / 0.3160 / 0.3187 / 0.2207 / 0.2875 / na / 0.4867 / 0.4912 / na / 0.2568 / 0.2531 / 0.5222 / na / 0.7935 / 0.8644
Lu / 0.2351 / 0.3194 / 0.3165 / 0.2607 / 0.1780 / 0.3827 / 0.1230 / na / na / na / na / na / na / na / na / na
Nd / 0.3966 / 0.6003 / 0.5937 / 0.5847 / 0.6087 / 0.7536 / 0.3112 / 0.3307 / 0.8159 / na / 0.3256 / 0.5066 / 0.3735 / na / 0.8524 / 0.7897
Pr / 0.3802 / 0.5047 / 0.4815 / 0.5062 / 0.6534 / 0.6047 / 0.2739 / 0.1974 / 0.8077 / na / 0.3319 / 0.4194 / 0.3963 / na / 0.764 / 0.7173
Sc / 0.6634 / 0.2968 / 0.4216 / 0.3291 / 0.3962 / 0.3363 / 0.5351 / 0.2070 / 0.4406 / 0.3348 / na / na / na / na / na / na
Sm / na / na / na / na / na / na / na / na / na / na / na / 0.1111 / 0.4200 / na / 0.3692 / 0.3549
Tb / 0.2656 / 0.7233 / 0.5708 / 0.7620 / 0.4987 / 0.7001 / 0.2450 / 0.2658 / 0.5671 / 0.5278 / 0.3727 / na / 0.3749 / na / 0.4347 / 0.3928
Y / 0.4071 / 0.5069 / 0.5194 / 0.5597 / 0.5792 / 0.5454 / 0.3133 / 0.1883 / 0.4779 / 0.5281 / 0.4915 / na / 0.5569 / na / 0.7612 / 0.6467
Yb / 0.3571 / 0.1409 / 0.2406 / 0.0782 / 0.1770 / 0.2020 / 0.2332 / 0.5066 / 0.2123 / 0.2481 / 0.4053 / na / 0.1844 / 0.2472 / na / na
EWI / 0.5550 / 0.6311 / 0.6356 / 0.6592 / 0.6397 / 0.7369 / 0.4812 / 0.3107 / 0.9388 / 0.8067 / 0.5528 / na / 0.6251 / 0.7070 / 0.2684 / 0.9748
UWI / 0.6206 / 0.5970 / 0.6219 / 0.6306 / 0.6170 / 0.7130 / 0.5607 / 0.3112 / 0.9333 / 0.7921 / 0.5764 / na / 0.5889 / 0.6323 / 0.2830 / 0.9891
This table provides an overview of the return correlations of rare earths oxides for the period January 1, 2004-November 8, 2013. Depending on data availability, the period might differ for single elements: For FOBprices of lanthanum, cerium, praseodymium, neodymium, samarium, europium, terbium, and dysprosium, the time series begins in January 2004. For FOBprices of yttrium and erbium, the time series begins in August 2010. For China prices of yttrium, lanthanum, cerium, praseodymium, neodymium, europium, terbium, and dysprosium, the time series begins in January 2005. For China prices of erbium, the time series begins in January 2009. For China prices of gadolinium, the time series begins in July 2010. For China prices of scandium, holmium, and ytterbium, the time series begins in November 2010.The upper diagonal matrix shows the correlations for returns based on FOB prices, while the lower diagonal matrix presents the correlations for returns based on China prices. Calculations are based on prices from the Asian Metals database; all calculations based on USD/kg. Ce: cerium; Dy: dysprosium; Er: erbium; Eu: europium; Gd: gadolinium; Ho: holmium; La: lanthanum; Lu: lutetium; Nd: neodymium; Pr: praseodymium; Sc: scandium; Sm: samarium; Tb: terbium; Y: yttrium: Yb: ytterbium; EWI: equally weighted REE index; UWI: usage weighted REE index; na: not available.
TABLE OA-VI
Correlation Matrix of Rare Earth Elements Returns – Metals
Ce / Dy / Eu / La / Nd / Pr / Sm / TbCe / 0.2724 / 0.2611 / 0.7784 / 0.3701 / 0.3368 / 0.5267 / 0.1913
Dy / 0.2472 / 0.6399 / 0.2636 / 0.5150 / 0.3522 / 0.2762 / 0.6142
Eu / na / na / 0.2559 / 0.3270 / 0.2006 / 0.2491 / 0.6746
La / 0.5779 / 0.2345 / Na / 0.3799 / 0.3401 / 0.5559 / 0.2032
Nd / 0.3152 / 0.5408 / Na / 0.3571 / 0.7098 / 0.4907 / 0.4107
Pr / na / na / Na / na / na / 0.4231 / 0.3056
Sm / 0.1458 / 0.2790 / Na / 0.1821 / 0.3005 / na / 0.2470
Tb / 0.2073 / 0.6818 / Na / 0.3024 / 0.5501 / na / 0.3284
This table provides an overview of the return correlations of rare earth metals for the period January 1, 2004-November 8, 2013. Depending on data availability, the period might differ for single elements: The time series for FOB prices begins in January 2004; the time series for China prices begins in January 2005 The upper diagonal matrix shows the correlations for returns based on FOB prices, while the lower diagonal matrix presents the correlations for returns based on China prices. Calculations are based on prices from the Asian Metals database; all calculations based on USD/kg. Ce: cerium; Dy: dysprosium; Er: Eu: europium; La: lanthanum; Nd: neodymium; Pr: praseodymium; Sm: samarium; Tb: terbium; na: not available.
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Online Appendix 7: Geology and Mineralogy of Rare Earths Elements
More than 100 minerals are known to contain REEs; however, the concentration in most of the minerals is too low to allow for mining as an ore. The most important minerals for mining rare earths are Monazite, Bastnäsite, and Xenotime (see Anstett, 1986, and Jackson et al., 1993). Monazite can contain up to 70% of rare earth oxides, and bastnäsite up to 75%, while xenotime contains about 67% rare earth oxides. The light REEs usually make up 80%-99% of a deposit, as they are more abundant and concentrated (see Humphries, 2012). Bastnäsite and monazite contain mainly light rare earths; however, the amount of heavy rare earths is two to three times higher in monazite compared to bastnäsite (see Hurst, 2010b).
Xenotime is the major source for yttrium and heavy rare earths,while monazite typically contains radioactive thorium (see, for example, Jackson et al., 1993, p. 10; Hedrick,2004b, p. 2; Hurst,2010b, p. 4, and Baotou National Rare Earth Hi-Tech Industrial Development Zone, 2013). Table OA7 gives an overview of the concentrations of the single REEs in different ores.
— Please insert Table OA-VII about here —
Mining and processing rare earths is complex and expensive, and is generally conducted in five steps, according to GAO (2010), Hurst (2010b), and Humphries (2012):
1.Mining: Extraction of the ore from the mineral deposits.
2.Separating: Creation of rare earth concentrate and separation of individual rare earth oxides.
3.Reduction: Refining the rare earth oxides into metals.
4.Alloying: Processing the rare earth metals into rare earth alloys.
5.Manufacturing: Production of devices and components from the rare earth alloys, e.g., permanent magnets.
The single elements are usually not found separately, but are rather mixed together and often contain radioactive elements such as thorium and uranium. BecauseREEstend to have a high reactivity and are chemically similar, purification and separation of the individual elements is difficult (see Jackson et al., 1993). Extracting the elements from ore involves flotation of the crushed ore and dissolving in acid. Accordingly, the production of rare earths produces toxic and hazardous waste (Bourzac, 2011).
TABLE OA-VII
Main Minerals for Rare Earth Mining
Rare Earth Oxide Contained in Major Source Minerals (% of Total REO)Z / Symbol / Element / L/H / Monazite / Bastnäsite / Xenotime
21 / Sc / Scandium / H / Na / Na / Na
39 / Y / Yttrium / H / 1.950 – 2.000 / 0.100 / 60.000
57 / La / Lanthanum / L / 23.000 / 32.000 /
58 / Ce / Cerium / L / 46.000 – 46.500 / 49.500 - 50.000 / 10.600
59 / Pr / Praseodymium / L / 5.000 – 5.100 / 4.000 – 4.200
60 / Nd / Neodymium / L / 18.400 – 19.000 / 13.000
61 / Pm / Promethium / L / Na / Na / Na
62 / Sm / Samarium / L / 2.300 – 3.000 / 0.500 – 0.800 / 1.200
63 / Eu / Europium / L/H / 0.070 – 0.100 / 0.100 – 0.110 / 0.010
64 / Gd / Gadolinium / L/H / 1.700 / 0.150 / 3.600
65 / Tb / Terbium / H / 0.160 / / 1.000
66 / Dy / Dysprosium / H / 0.500 – 0.520 / 0 – 0.120 / 7.500
67 / Ho / Holmium / H / 0.090 / 2.000
68 / Er / Erbium / H / 0.130 / 6.200
69 / Tm / Thulium / H / 0.010 – 0.013 / / 1.270
70 / Yb / Ytterbium / H / 0.060 – 0.061 / 0 – 0.020 / 5.000 – 6.000
71 / Lu / Lutetium / H / 0.006 / 0.630
This table gives an overview of minerals that can be used for rare earth production. Z: Atomic number; Symbol: symbol in the periodic table; Element: rare earth element name; L/H: light or heavy rare earth element; REO: Rare earth oxide; Na: Not applicable. Data is obtained from Anstett (1986, p. 3) and Jackson et al. (1993, p. 9). First percentage rate in columns of the minerals monazite, bastnäsite, and xenotime are lowest estimates;the second are highest estimates as of Anstett (1986) and Jackson et al. (1993).Curly brackets mean that complete separations between different REEs cannot be made precisely, e.g., xenotime consists of 10.6% lanthanum, cerium, praseodymium, and neodymium, with unknown composition among these elements.
1
TABLE OA-VIII
CAARs for Chinese REE Supplier, U.S. REE User, and Global REE Supplier and Refiner Companies After Extreme Price Events (±2 and ±1 standard deviations)
Section 1 / / Boehmer Test / t-Test / Johnson TestEvent window / Mean / Median / t-value / z-score / J-value / Nobs
(#)
Panel A: Chinese Rare Earth Companies
[0;+1] / 0.76% / 0.35% / 2.612*** / 2.386** / 2.412** / 126
[0;+3] / 1.46% / 0.88% / 3.547*** / 3.141*** / 3.183*** / 126
[0;+5] / 1.48% / 1.41% / 3.700*** / 3.188*** / 3.211*** / 126
[0;+10] / 2.90% / 1.80% / 4.052*** / 3.676*** / 3.724*** / 126
[-5;+1] / 1.63% / 1.57% / 3.107*** / 2.915*** / 2.920*** / 126
[-5;+3] / 2.33% / 1.80% / 3.884*** / 3.508*** / 3.536*** / 126
[-5;+10] / 3.77% / 3.01% / 4.295*** / 3.923*** / 3.957*** / 126
Panel C: U.S. Rare Earth Companies
[0;+1] / -0.24% / 0.02% / -0.934 / -1.170 / -1.168 / 939
[0;+3] / -1.83% / -0.46% / -5.273*** / -5.435*** / -5.439*** / 939
[0;+5] / -0.35% / 0.00% / -0.814 / -1.069 / -1.069 / 938
[0;+10] / -0.75% / -1.04% / -2.354** / -1.695* / -1.694* / 938
[-5;+1] / -2.27% / -1.12% / -5.740*** / -5.270*** / -5.269*** / 939
[-5;+3] / -3.86% / -1.80% / -7.722*** / -7.194*** / -7.206*** / 939
[-5;+10] / -2.77% / -2.31% / -5.573*** / -4.751*** / -4.748*** / 938
Panel E: Largest and Most Liquid Global Rare Earth Companies (excluding China)
[0;+1] / -0.79% / 0.01% / -1.784* / -1.727* / -1.729* / 158
[0;+3] / -0.77% / -0.26% / -0.772 / -1.143 / -1.144 / 158
[0;+5] / -0.70% / -0.19% / -0.541 / -0.911 / -0.913 / 158
[0;+10] / -1.11% / -0.78% / -1.234 / -1.181 / -1.182 / 158
[-5;+1] / -3.08% / -1.86% / -3.631*** / -3.357*** / -3.357*** / 158
[-5;+3] / -3.06% / -1.15% / -2.974*** / -2.866*** / -2.866*** / 158
[-5;+10] / -3.39% / -1.79% / -3.015*** / -2.733*** / -2.732*** / 158
(continued)
Section 2 / / Boehmer Test / t-Test / Johnson TestEvent window / Mean / Median / t-value / z-score / J-value / Nobs
Panel A: Chinese REE Supplier Companies
[0;+1] / 0.45% / 0.41% / 1.629 / 1.512 / 1.513 / 280
[0;+3] / 0.77% / 0.28% / 2.332** / 2.095** / 2.099** / 280
[0;+5] / 1.12% / 0.38% / 2.231** / 2.118** / 2.121** / 280
[0;+10] / 1.96% / 1.37% / 3.106*** / 2.703*** / 2.707*** / 280
[-5;+1] / 1.46% / 1.94% / 2.907*** / 2.956*** / 2.961*** / 280
[-5;+3] / 1.77% / 1.30% / 3.487*** / 3.453*** / 3.465*** / 280
[-5;+10] / 2.96% / 0.99% / 4.246*** / 3.876*** / 3.882*** / 280
Panel B: Chinese REE Supplier Companies
[0;+1] / -0.73% / -0.60% / -2.276** / -2.642*** / -2.634*** / 252
[0;+3] / 0.31% / -0.18% / 0.745 / 0.766 / 0.767 / 252
[0;+5] / -2.07% / -1.97% / -3.641*** / -3.759*** / -3.764*** / 252
[0;+10] / -1.43% / -1.72% / -1.684* / -1.820* / -1.818* / 252
[-5;+1] / 0.55% / -2.58% / 0.129 / 0.912 / 0.914 / 252
[-5;+3] / 1.59% / -1.19% / 1.483 / 2.187** / 2.197** / 252
[-5;+10] / -0.15% / -3.27% / -0.577 / -0.138 / -0.138 / 252
Panel C: U.S. REEUser Companies
[0;+1] / 0.58% / 0.35% / 4.290*** / 3.707*** / 3.717*** / 1,967
[0;+3] / -0.56% / -0.49% / -3.291*** / -2.092** / -2.087** / 1,967
[0;+5] / -1.17% / -0.78% / -5.366*** / -4.000*** / -3.988*** / 1,965
[0;+10] / -1.09% / -0.12% / -2.772*** / -3.063*** / -3.068*** / 1,963
[-5;+1] / 0.91% / 0.59% / 3.837*** / 3.193*** / 3.195*** / 1,967
[-5;+3] / -0.23% / -0.08% / -1.046 / -0.595 / -0.595 / 1,967
[-5;+10] / 1.40% / 0.46% / 3.150*** / 3.102*** / 3.107*** / 1,963
Panel D: U.S. REEUser Companies
[0;+1] / 0.08% / -0.15% / 0.486 / 0.514 / 0.514 / 2,046
[0;+3] / 0.12% / -0.21% / 0.751 / 0.622 / 0.622 / 2,046
[0;+5] / 0.28% / -0.31% / 1.152 / 1.152 / 1.152 / 2,045
[0;+10] / -0.05% / -0.79% / -0.538 / -0.147 / -0.147 / 2,041
[-5;+1] / -0.26% / -0.36% / -0.895 / -1.036 / -1.035 / 2,045
[-5;+3] / -0.26% / -0.46% / -0.627 / -0.939 / -0.939 / 2,045
[-5;+10] / -0.50% / -1.08% / -1.416 / -1.305 / -1.305 / 2,040
Panel E: Global REESupplier and Refiner Companies (excluding China)
[0;+1] / 0.71% / 0.08% / 2.337** / 2.268** / 2.272** / 342
[0;+3] / 2.23% / 0.72% / 5.257*** / 4.902*** / 4.918*** / 342
[0;+5] / 2.12% / 0.62% / 4.076*** / 3.536*** / 3.549*** / 342
[0;+10] / 3.33% / 1.64% / 1.278 / 3.774*** / 3.811*** / 342
[-5;+1] / 0.52% / -0.49% / 1.041 / 0.720 / 0.724 / 342
[-5;+3] / 2.04% / -0.01% / 3.364*** / 2.677*** / 2.699*** / 342
[-5;+10] / 3.14% / 1.06% / 1.260 / 3.045*** / 3.065*** / 342
Panel F: Global REESupplier and Refiner Companies (excluding China)
[0;+1] / 0.55% / 0.06% / 1.371 / 1.365 / 1.370 / 312
[0;+3] / -0.52% / -0.75% / -1.295 / -0.910 / -0.908 / 312
[0;+5] / -1.99% / -1.14% / -3.410*** / -3.138*** / -3.141*** / 312
[0;+10] / -0.91% / -0.97% / -1.673* / -1.173 / -1.173 / 312
[-5;+1] / -0.19% / -0.24% / -0.530 / -0.292 / -0.291 / 312
[-5;+3] / -1.25% / -1.26% / -1.951* / -1.539 / -1.537 / 312
[-5;+10] / -1.65% / -1.74% / -2.198** / -1.665* / -1.663* / 312
This table reports equally weightedcumulative average abnormal returns in response to extreme price events () for various event windows, applying a market model with an estimation period until for listed Chinese REE supplier (panels A and B) and U.S. REE user (panels C and D) companies, and global REEsupplier and refiner companies(excluding China) (panels E and F). In Section 1 (section 2),we define a date as an extreme price event if the price of the usage weighted REE index (based on FOB prices) on that date deviates more than ±2 standard deviations(±1 standard deviations) from the mean, based on a fifteen-week rolling window for the estimation of the standard deviation. The following description is based on ±1standard deviation, but the systematic is analogous to ±2standard deviations. If consecutive dates of extreme events on the same side of the distribution are recorded for either (positive deviation) or (negative deviation), only the first date of occurrence will be used. If the two extreme events are on different sides of the distribution (extreme event on (positive deviation) and the consecutive event on (negative deviation) or vice versa), both events will be considered. Finally, we require a minimum period of four weeks until a new extreme price event on the same side of the distribution is recorded. Panels A, C, and E show the results for positive deviations;panels B, D, and F show results for negative deviations. The observation periodis from January 1, 2008 until August 31, 2014. Test statistics are the Boehmer et al. (1991) z-score, the t-values, and the J-value (Johnson, 1978). Nobs are the number of observed extreme price events times the number of companies. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively.
1
TABLE OA-IX
Enlarged Tables 4 and 5 Including Firm-Level Controls
Dependent Variable: CARSection 1 / Event Window
[0;3] / [0;5] / [0;10] / [-5;3] / [-5;10]
Panel A: All Events
US / 0.002 / 0.010*** / 0.007 / 0.006 / 0.012*
(0.003) / (0.004) / (0.005) / (0.005) / (0.007)
Size / 0.000 / -0.000 / -0.003** / 0.002 / -0.001
(0.001) / (0.001) / (0.001) / (0.002) / (0.002)
Growth / -0.001 / 0.002 / 0.002 / -0.001 / 0.001
(0.001) / (0.002) / (0.002) / (0.004) / (0.004)
ROE / -0.001 / -0.000 / -0.003 / 0.002 / 0.001
(0.003) / (0.005) / (0.008) / (0.006) / (0.010)
Leverage / 0.000 / 0.001 / 0.000 / -0.000 / -0.000
(0.000) / (0.001) / (0.001) / (0.001) / (0.002)
Constant / -0.009 / -0.005 / 0.008 / -0.041*** / -0.023
(0.007) / (0.011) / (0.012) / (0.014) / (0.016)
Industry FE / Yes / Yes / Yes / Yes / Yes
Nobs / 1,281 / 1,281 / 1,281 / 1,281 / 1,281
/ 0.82 / 2.72*** / 5.53*** / 3.10*** / 3.18***
(continued)
Panel B: Pre-WTO Dispute Resolution Case
US / -0.002 / 0.011* / 0.009 / -0.001 / 0.010
(0.004) / (0.006) / (0.008) / (0.008) / (0.010)
Size / 0.002** / 0.001 / 0.000 / 0.003 / 0.002
(0.001) / (0.001) / (0.002) / (0.002) / (0.003)
Growth / -0.000 / 0.001 / 0.002 / 0.002 / 0.005
(0.002) / (0.002) / (0.003) / (0.006) / (0.006)
ROE / 0.000 / -0.002 / -0.010 / -0.000 / -0.011
(0.004) / (0.007) / (0.013) / (0.008) / (0.015)
Leverage / 0.002 / 0.004* / 0.002 / 0.002 / 0.002
(0.001) / (0.002) / (0.002) / (0.002) / (0.002)
Constant / -0.010 / -0.010 / -0.016 / -0.037* / -0.043
(0.009) / (0.013) / (0.019) / (0.020) / (0.026)
Industry FE / Yes / Yes / Yes / Yes / Yes
Nobs / 630 / 630 / 630 / 630 / 630
/ 2.35** / 12.41*** / 3.54*** / 2.91*** / 6.11***
Panel C: Post-WTO Dispute Resolution Case
US / 0.005** / 0.008* / 0.005 / 0.013** / 0.012*
(0.003) / (0.004) / (0.006) / (0.005) / (0.007)
Size / -0.001 / -0.002 / -0.006*** / 0.002 / -0.004
(0.001) / (0.001) / (0.002) / (0.002) / (0.002)
Growth / -0.001 / 0.003 / 0.001 / -0.009*** / -0.007***
(0.001) / (0.004) / (0.003) / (0.002) / (0.002)
ROE / -0.003 / 0.004 / 0.012 / 0.006 / 0.021
(0.005) / (0.008) / (0.010) / (0.011) / (0.013)
Leverage / -0.002** / -0.004 / -0.003 / -0.004* / -0.006*
(0.001) / (0.003) / (0.003) / (0.002) / (0.003)
Constant / -0.011 / 0.006 / 0.040** / -0.049*** / 0.002
(0.011) / (0.017) / (0.020) / (0.015) / (0.022)
Industry FE / Yes / Yes / Yes / Yes / Yes
Nobs / 651 / 651 / 651 / 651 / 651
/ 2.75*** / 1.73* / 16.98*** / 4.10*** / 25.61***
(continued)
1